U.S. expands case against ex-Goldman director Gupta

Reuters, Tue Jan 31, 2012

(Reuters) - Federal prosecutors have expanded their insider trading case against former Goldman Sachs Group Inc (GS.N) director Rajat Gupta, saying the illegal activity lasted longer and involved more trades than alleged.

An amended indictment made public on Tuesday expands the period in which Gupta supposedly provided illegal tips to former Galleon Group hedge fund founder Raj Rajaratnam, now serving an 11-year prison term following his insider trading conviction.

Gary Naftalis, a lawyer for Gupta, did not immediately return a call seeking comment.

Gupta is a former worldwide chief at the consulting firm McKinsey & Co, and is the most prominent business executive accused of wrongdoing in a wide-ranging government insider trading probe centered on hedge funds.

According to the amended indictment, Rajaratnam bought at least 350,000 Goldman shares on March 12, 2007, soon after the audit committee of Goldman's board, including Gupta, discussed the better-than-expected quarterly results that the bank would release the next day.

It also said Rajaratnam sold 180,000 shares of Procter & Gamble Co (PG.N) short on January 29, 2009, after learning details from Gupta, who sat on P&G's board, about that company's expected earnings announcement the next day.

Gupta was previously accused in October 2011 of tipping Rajaratnam about Goldman's activities in September and October 2008, resulting in several trades.

Both indictments charge Gupta with five counts of securities fraud and one count of conspiracy.

(Reporting By Jonathan Stempel, editing by Matthew Lewis)

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100 Countries Back World Environment Agency: France

Jakarta Globe, January 31, 2012

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Paris. More than a hundred countries now support a French proposal to create a “World Environment Organization” at the upcoming 20th anniversary conference of the Rio Summit, France’s ecology minister said on Tuesday.

“More than 100 countries have now associated themselves with the proposal,” Nathalie Kosciusko-Morizet said at a conference in Paris aimed at stimulating ideas for the June 20-22 global gathering.

The idea is to beef up the UN Environment Program (UNEP), which critics say lacks clout and resources for dealing with the world’s worsening environmental crisis.

Kosciusko-Morizet said the new agency was a key to the success of the June 20-22 conference, designed to assess the 20 years that have passed since the 1992 Rio Summit that nailed the environment to the political agenda.

It should be part of a rethink of the world’s economy, in which green issues and social questions should be placed alongside the search for profit.

“The new capitalism which emerges from the crisis has to be environmental, or it won’t be new,” she said.

The Paris conference gathered several hundred representatives from national and local government, thinktanks and civil society with the declared aim of gingering up a program, called “draft zero,” that is being hammered out for Rio.

Agence France-Presse

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Senate clears way for vote on insider-trading ban

Associated Press, By LARRY MARGASAK, January 30, 2012 

WASHINGTON (AP) -- Congress is rushing to make it absolutely clear to everyone that its members are banned from insider stock trading, hoping to improve their sagging image that has approval ratings at historic lows.

Senators made the first move Monday. Their 93-2 procedural vote cleared the way for Senate passage - possibly later this week - of a bill that would require disclosure of stock transactions within 30 days and explicitly prohibit members of Congress from initiating trades based on non-public information they acquired in their official capacity. The legislation, at least partly symbolic in nature, is aimed at answering critics who say lawmakers profit from businesses where they have special knowledge.

U.S. lawmakers already are subject to the same penalties as other investors who use non-public information to enrich themselves, though no member of Congress in recent memory has been charged with insider trading. In 2005, the Securities and Exchange Commission and Justice Department investigated then-Senate Majority Leader Bill Frist's sale of stock in his family's hospital company, but no charges were ever brought against the Tennessee Republican.

Voters may believe lawmakers paid an annual salary of $174,000 are enriching themselves by making investments based on what they learn in Congress. A recent segment of CBS' "60 Minutes" in November questioned trades by a House committee chairman, the current speaker and his predecessor's husband. Speaker John Boehner, former Speaker Nancy Pelosi and Rep. Spencer Bachus, R-Ala., all denied wrongdoing. Bachus chairs the Financial Services Committee.

"Members of Congress are not above the law," Senate Majority Leader Harry Reid said before Monday's test vote. "We must play by the same rules every other American plays by." He said the bill "will clear up any perception that it's acceptable for members of Congress to profit from insider trading."

A recent Wall Street Journal/NBC News poll of registered voters found 56 percent favored replacing the entire 535-member Congress. Other polls this year have given Congress an approval rating between 11 percent and 13 percent, while disapproval percentages have ranged from 79 percent to 86 percent.

Joseph Lieberman, I-Conn. said, "The numbers of people who have a favorable impression of this body are so low that we're down to close relatives and paid staff. And I'm not so sure about the paid staff."

Said Sen. Scott Brown, R-Mass., one of the bill's authors: "Beginning today, the Senate is embarking on a mission to help address the deficit of trust with the American people."

The bill is entitled the Stop Trading on Congressional Knowledge (STOCK) Act. President Barack Obama endorsed it in his State of the Union speech last week and also raised the issue in his radio and Internet address Saturday.

The White House said Monday in a statement, "The administration believes this bipartisan legislation is an important first step to prevent members of Congress from profiting from their positions and calls for swift passage."

The Senate bill would prohibit lawmakers from tipping off family members or others about non-public information that could influence a stock's price, in addition to the explicit ban itself, and would require members to disclose stock transactions within 30 days. And it would direct the House and Senate ethics committees to write rules that would make insider trading violators subject to congressional punishment.

Other legislative branch employees also would be subject to the ban, but only those who are required to file annual financial disclosure statements would be subject to the reporting requirement. For 2012, employees making $119,554 or more are required to file disclosure statements..

House leaders hope to pass their version of the bill by the end of February, and Majority Leader Eric Cantor, R-Va., said he wants to expand the legislation to include land deals and other transactions.

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Occupy DC protesters in standoff with police as eviction deadline passes

Demonstrators in Washington refuse to comply after National Park Service orders the camp to be cleared on hygiene grounds

guardian.co.uk, Ryan Devereaux, Monday 30 January 2012

Occupy DC protesters. Photograph: Karen Bleier/AFP/Getty Images

Occupy demonstrators in Washington DC have chosen to stand their ground in the face of newly-enforced anti-camping regulations – but protesters worry the authorities could move in at any moment.

The National Park Service in Washington announced it would enforce existing anti-camping rules – which bar demonstrators from holding camping gear, bedding and cooking supplies – at two parks that have served as a home to Occupy DC protesters since the fall. In response, demonstrators have turned the central feature of McPherson Square, a statue of General James B McPherson, into a makeshift tent, and have refused to comply with the orders.

The regulations have largely gone unenforced since the occupation of McPherson Square and Freedom Plaza began in October, but from noon on Monday, the NPS said that would no longer be the case. Critics of the protest camps cite health concerns and an alleged rat infestation as grounds to remove the demonstrators, but some see the sudden vigour to enforce the regulations as a pretext for eviction. Legba Carrefour of Occupy DC described the renewed enforcement of the anti-camping rules as "death by a thousand bureaucratic cuts."

By 12pm, the confrontation that many expected had not come, and a standoff began. Protesters in McPherson Square had draped a so-called "tent of dreams" over the statue and people quickly gathered inside.

Protester Caty McClure said there were "at least 50" people gathered inside the giant tent. A speaker explained that the tent represents the protesters' dreams of seeing a nation where corporations could not guide the democratic process, and where housing existed for all. Gathered around the statue the protesters chanted: "Let us sleep so we can dream." Protesters have surrounded the statue with smaller personal tents.

The plan, McClure explained, is for some protesters to hold a "sleep-in", while others stage a "sleep strike." McClure said NPS authorities had not moved in the protesters. "They're holding off for now," she said. McClure said she believed the "insane amount of media" at the park was keeping officials at bay.

McClure said she hoped the media would stick around. "Once they leave, the police are probably gonna roll in.'

National Lawyers Guild observer and attorney Ann Wilcox agreed that the heavy media presence at the park seemed to have discouraged any effort to crack down on the protesters.

"I don't think the police really want to move in with so much media," Wilcox said. "They might not even enforce it until tonight [Monday night] or tomorrow [Tuesday]."

Wilcox estimated there were "a couple thousand" people gathered at McPherson Square. At Freedom Plaza, she said a "skeleton crew" of about "40 or 50" protesters remained. Demonstrators at Freedom Plaza have a permit allowing for their protest, though they are still subject to the same anti-camping rules and have received the same notification from the NSP. In attempt to hold on to the permit, Wilcox explained, many protesters had cleared their belongings from the plaza.

The two occupations have consistently differed in their tactics, with the encampment at McPherson Square tending to be more provocative.

"It's a totally different approach," Wilcox said.

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Wiki leaders on the rise

RNW, 28 January 2012, by Maike Winters

(Graphic: Radio Netherlands Worldwide)

               

Could our new world leaders be one of the young people who camped out as part of the Occupy movement or who fought for their lives during the Arab Spring? All these young people were inspired by the idea of change. Now a new political platform wants to unite people with ideas to bring about reform in the Netherlands. Partij2030 is part of a global trend. 

The man behind the initiative, 33-year-old Joop Hazenberg, has spent years searching for new ways to get society ready for the future. In addition to a pro-European policy and an alternative welfare state, his vision centres on crowdsourcing: a kind of wiki government in which our leaders build on the knowledge of citizens, comparable to how we consult an internet encyclopaedia like Wikipedia.

Trend

As Joop explains, he's not alone in his ambitions:

“This model is already being used in other parts of the world. In the UK, for example, major cutbacks are taking place. The government has asked people to contribute money-saving ideas. It’s a fairly controversial move, but it’s generated no fewer than 200,000 responses.”

He continues: “That’s a list a policy officer could never have come up with. It’s all about utilising society’s collective knowledge. Thanks to internet and social media, that knowledge is very easy to find.”

Paul Lucardie, political scientist at the University of Groningen, sees this as part of an international trend.

“People want to have more of a say; they want change. Just look at how the Pirate Party has become an international movement, enjoying great popularity in Sweden and Germany. The trend is to start something new that can be passed on quickly. Unfortunately, these kinds of initiatives don’t usually last long.”

Time and energy

Lucardie is referring to the Occupy movement. After disenchanted Americans occupied Wall Street in September last year, it wasn’t long before demonstrators had set up tent camps in over 900 cities across the world.

“That sounds impressive, but in the end how many people actually took part? Perhaps 100,000. That’s not much out of a population of six billion. People want change, but unfortunately there’s only a small group with the time and energy to persevere. People are more concerned about keeping their jobs and pensions than genuine government reform.”

The founder of Partij2030 begs to differ. The first public brainstorming session is scheduled for next week. People from all regions and backgrounds have been invited to contribute their thoughts and ideas. The aim is to get a new political movement off the ground.

Radical edge

“A fine initiative, very much geared towards the future,” says Ringo Ossewaarde, associate professor of sociology at the University of Twente. But he believes the plans lack a radical edge. As he sees it, a wiki government is nothing new.

“It has existed for years under the name civic engagement. And it’s worth asking what the quality of a policy created by ordinary citizens will be.”

The younger generation needs to be able to trust in government again, believes Joop Hazenberg. Time Magazine declared 2011 to be the year of the demonstrator. Will 2012 be the year of wiki government?

“No, it’s still too early for that. I hope this year will be a year of unity: uniting groups of campaigners and people with ideas and trying to bring about change together. Bringing people together in this fragmented society. Partij2030 is an experiment, to see whether we can take part in the 2014 elections with a radical reform agenda for the Netherlands.”

Agents of change in Cuba and Yemen

Across the world, people are trying to change political structures. For example, Yoani Sánchez from Cuba has devoted years to writing a blog about Generation Y.

The aim of her writing is to promote freedom of information. She was given the opportunity to interview President Obama, who praised her for giving him a unique insight into the lives of Cubans.

Yoani Sánchez has also received a Prince Claus Award and the International Press Institute’s World Press Freedom Hero Award. In an interview with Radio Netherlands Worldwide, she said:

“If this generation of young people gain access to social networks, all kinds of things will happen. I believe that if we can try things out in a virtual Cuba, our encounters in the real Cuba will be less violent and less traumatic.”

Yemeni journalist and politician Tawakkul Karman is another example. She founded Women Journalists Without Chains, fought for press freedom and set up a news service for mobile phones.

Tawakkul Karman led demonstrations during the Arab revolution. In 2011, she was awarded the Nobel Peace Prize in recognition of her non-violent struggle for the rights of women.

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Occupy London protesters evicted from City office block

Peaceful eviction from empty UBS building is followed by alleged assault by bailiff during removal of neighbouring squatters

guardian.co.uk, Lizzy Davies, Monday 30 January 2012

Protesters, bailiffs and police clash outside the London office block from
 which Occupy members and squatters were evicted. Photograph:
Jules Mattsson/LNP

Dozens of Occupy London protesters have been evicted from a disused office block in the City of London, criticising police and bailiffs for what they called heavy-handed and "utterly irresponsible" tactics.

Around 50 protesters were evicted peacefully from the UBS-owned building they had turned into an educational hub called the Bank of Ideas, shortly after midnight. Police and bailiffs then moved to evict squatters from another building in the complex, also owned by the Swiss banking giant, during which protesters claim a photographer was punched in the face by a bailiff who then drove his car at speed towards more protesters.

A spokesman for the Metropolitan police said a man, understood to be the bailiff, had been arrested after an allegation of assault and criminal damage. Another man, believed to be a protester, was briefly arrested "to prevent a breach of the peace" but quickly released.

The photographer, Jules Mattsson, reported the assault allegation on Twitter. "I am, obviously, pretty pissed off about this all," he wrote. "I have a right to go about my job covering news without fear of assault."

One of the protesters present at the Earl Street site, who gave her name only as Anna, said the bailiffs were aggressive.

"I'm a photographer; I had one guy smash his fist into my camera. When I wheeled back from that he then hit me in the head and pushed me back by my face." She said she asked for his identification number and he responded with a threat.

In a statement, the Occupy movement said protesters had been "brought out peacefully and were allowed to take their belongings with them". But it added: "We are also gravely concerned that the police's actions this morning demonstrated a greater concern for the well-being of a building than the safety of the public. We look forward to receiving a formal response."

Around 70 protesters from the movement had gathered outside the building in solidarity with the squatters, who were not affiliated with the organisation.

"There was an awful lot of people around me also being pushed and shoved," Anna said.

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Labour to force Commons vote on stripping Hester bonus

BBC News, 29 January 2012

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Mr Hester was appointed after
RBS was bailed out by the taxpayer

Labour says it will force a Commons vote calling for RBS chief executive Stephen Hester to be stripped of his near-£1m bonus.

It will hold an Opposition Day debate early next month to pressure the government over the £963,000 payment.

Although not binding, the vote could put the coalition under further pressure to intervene.

It has faced widespread criticism for its decision not to block the bonus at the part-government owned bank.

A Labour source told BBC political correspondent Vicky Young that David Cameron and the government had failed to act and it was right for Parliament to voice its opinion.

He said this was "one of those moments" when the public was so outraged that Parliament had to assert itself.

Labour can hold a debate on an issue of its choice on one of its allocated "Opposition Days." The next one is scheduled for the week after next.

The coalition is free to ignore the result but it could be uncomfortable for some Lib Dem and Conservative MPs, our correspondent says.

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Dutch pension fund ABP sues Goldman Sachs

RNW, 28 January 2012

(Photo:ANP)

Dutch pension fund ABP is suing US investment bank Goldman Sachs for knowingly selling it junk mortgages and providing misleading information.

The ABP pension fund for government and education employees is the largest pension fund in the Netherlands and among the three largest in the world. Prior to the 2008 US mortgage and bank crisis, ABP invested large sums in bonds linked to US mortgages.

ABP accuses Goldman Sachs of misinforming the pension fund as to the credit worthiness of the bonds, which proved to be far riskier than the bank had suggested. This eventually caused ABP to suffer significant losses. ABP will not disclose the exact amount of the losses it suffered, a spokesperson announced on Saturday.

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RBS chairman gives up £1.4m bonus

Bank announces that Sir Philip Hampton will not receive bonus amid controversy over decision to award RBS chief executive Stephen Hester £963,000

guardian.co.uk, Conal Urquhart, Jill Treanor and agencies, Saturday 28 January 2012

The RBS chairman, Sir Philip Hampton, who has given up his bonus.
Photograph: Christian Sinibaldi for the Guardian

Royal Bank of Scotland chairman Sir Philip Hampton will not receive a £1.4m share award because he had not meet the performance criteria attached to them when he was first awarded them when he joined the bank in 2009.

Amid the controvery over a near £1m bonus for chief executive Stephen Hester, it had been reported that the controversial share award would not pay out and on Saturday: "Sir Philip Hampton will not receive the 5.17m shares he was awarded in 2009 when he joined RBS."

While Hampton had decided not to accept the award of 5.2m shares – which was handed to him when he joined the bank in 2009 – it is understood that the conditions attached to the potential pay out had not been achieved.

Hester is receiving 3.6m in shares – worth just under £1m – but the Labour leader, Ed Miliband, urged the government to block the bonus for Hester. David Cameron said the contract was arranged by the previous Labour government and should be honoured.

Hampton is thought to have told the bank's remuneration committee it would not be appropriate for him to take the shares to which he is entitled. He was given the scheme when he was appointed at the 83% state-owned bank as part of a three-year long-term incentive deal.

It is understood RBS were not due to offer Hampton the share bonus, based on a variety of factors, until next month, but he chose to waive the entitlement earlier.

His decision is likely to put more pressure on Hester, who has faced calls from unions, politicians and the public to turn down his award of almost £1m.

Speaking at Chequers on Saturday, the prime minister said it was up to the chief executive to decide whether to give up his bonus. "It's obviously his decision," Cameron said. "My decision is to make sure the team at RBS get on with the job of turning the bank round, and we made our views very clear on the bonus and that's why it was cut in half compared to last year."

In a statement on Saturday, Miliband encouraged the government to vote against the bonus at the RBS annual general meeting in April.

"Freezing the pay of a nurse or hospital porter while allowing a publicly owned bank to pay million-pound bonuses, is the last nail in the coffin of this prime minister's claim that we're all in it together," he said.

"Having spent weeks boasting he would block bonuses, David Cameron refuses to explain why he has changed his mind."

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Occupy activists attempt to take over Davos debate

Movement tries to stage its own debate on 'remodelling capitalism' at World Economic Forum venue

guardian.co.uk, Jill Treanor in Davos, Friday 27 January 2012

Activists from the Occupy movement entered the open public event in Davos
 and challenged participants to join their debate on capitalism.
Photograph: Laurent Gillieron/EPA

Activists from the Occupy movement attempted to disrupt a debate in Davos attended by the Labour party leader, Ed Miliband, calling on him and the other delegates to leave the stage and join them on the floor of the packed debate on "remodelling capitalism".

The event, which was open to the public as part of a 10-year programme by the organisers of the World Economic Forum to engage with a wider audience, was eventually brought back under control when other public participants refused to support the efforts of Occupy activists.

Eyewitnesses said about 30 activists had strategically placed themselves in the large auditorium in the local Swiss Alpine High School and had attempted to conduct the debate on their own terms.

A representative of Occupy – who started the proceedings and gave her name only as Maria – had already been scheduled to take part in the debate, in which Juan Somavía, director general of the International Labour Organisation, was also a speaker.

After the event Miliband told the Guardian: "Occupy wanted us to do the debate in a different way."

But, he said, they had been outnumbered by other members of the public. He had argued: "This is a big moment of opportunity. There are real opportunities to show there are solutions that can be moved forward. I understand why people are angry."

The Guardian's economics editor, Larry Elliott, who chaired the debate said: "Eventually the will of the audience prevailed and we had a good, productive discussion."

The Occupy protesters have set up a camp of igloos in this Swiss Alpine resort attended by prime ministers, central bankers, business people and charitable organisations from across the globe. Earlier on Friday a number of them had attempted to gain entry to the high security venue where the major events are held and Klaus Schwab, the septuagenarian who founded the WEF, has offered to meet them on Saturday.

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George Osborne announces shakeup of City regulation at Davos

Speaking at the World Economic Forum, the chancellor announces plans to put the Bank of England in charge of day-to-day policing of the financial sector

guardian.co.uk, Larry Elliott and Jill Treanor in Davos,  Friday 27 January 2012

A Royal Bank of Scotland branch. The chancellor announced the publication
of a Financial Services Bill that will put the Bank of England in charge of
day-to-day policing of the financial sector. Photograph: Andy Rain/EPA

George Osborne has said that the government's shakeup of City regulation would overhaul a failed system and prevent banks from ever again being as exposed to bad loans as they were when the financial crisis broke in 2007.

Speaking in Davos on Friday, Osborne announced the publication of a financial services bill that will put the Bank of England in charge of day-to-day policing of the financial sector.

He also said the chancellor would have the power in an emergency to direct Threadneedle Street to step in to help a troubled bank.

In a speech to UK business leaders, Osborne said: "I am today publishing the financial services bill that will overhaul the failed system of financial regulation which allowed such dangerous levels of leverage to emerge.

"The failings of that system are now well understood. The tripartite structure [with authority split between the Treasury, Bank and the Financial Services Authority] was incoherent, without clear lines of accountability. Everyone was so focused on ticking off a regulatory checklist that nobody felt it was their responsibility to use their judgement.

"The astonishing result was that RBS was allowed to take over ABN Amro when the credit markets had already frozen up."

Osborne added that under the old system it was unclear who was in charge in a crisis when taxpayers' money was at stake.

"We are putting in place clear lines of accountability, and restoring that crucial element of judgement," he said.

The chancellor said independent central banks should not be put under pressure to do what governments did not have the courage to do on their own account. There would be no ambiguity about who was in charge.

"During normal times the independent Bank of England will be responsible for prudential regulation and systemic stability, accountable to parliament. But in a crisis, when taxpayers' money is at risk, both the responsibility and crucially the power to act will rest with the chancellor of the day," he said.

"For the first time it will allow the chancellor to direct specific liquidity interventions to assist individual entities, the special resolution regime for banks and general interventions to preserve stability as long as the government is willing to take responsibility for the action and take the resulting risk on its balance sheet.

"I hope that we will never again see the paralysis and confusion that did so much damage when the latest crisis hit." .

Press freedom under pressure in spite of Arab spring

RNW, 26 January 2012, by RNW News Desk      

(Photo: ANP)

Press freedom in Syria, Bahrain and Yemen has dropped drastically in the past year. The annual index for press freedom by NGO Reporters Without Borders (RSF) show that press freedom in Eritrea, North Korea and Turkmenistan continues to be poor - just like in other years. RSF describes these countries as “absolute dictatorships without civil rights”.

The revolutions in the Arab World have led to significant shifts in the index. Syria fell to de 176th place out of a total of 179 countries. According to RSF, large-scale censorship, violence and manipulation by the regime is making working as a journalist in Syria impossible. Bahrain and Yemen, where the opposition parties have been forced into silence, have also dropped in the index.

Tunisia, the country where the Arab spring began, is going in the right direction. Nevertheless, the new democracy cannot be said to have a free and independent press according to the RSF report. The report is also pessimistic about the situation in Egypt, where “the military leaders are continuing the dictatorial practices of ousted president Hosni Mubarak.”

Africa

In Africa, press freedom has increasingly come under pressure in the past year. Eritrea is still at the bottom of the list, and in Uganda in particular oppression by the regime has increased considerably. RSF is, however, positive about South Sudan, which seceded from Sudan last year. The new country has risen to what the RSF calls a respectable 111th place.

Latin America

In Latin America, press freedom in Chile has dropped to number 80. According to the RSF, security troops in particular have prevented the freedom of information of student protests. Press freedom in Cuba in 167th place still scores lowest in the region, Jamaica and Costa Rica are in the highest places in the region.

World powers

There is also criticism this year of press freedom in the largest world powers. China has dropped into the fifth before last place; the Chinese government has increased its control over the press and information and increased censorship of the internet. The United States fell to 47th place, mostly because of numerous arrests of journalists who reported on the Occupy Wall Street protests. Likewise Russia fell to 142nd place on the list.

The Press Freedom Index is traditionally led by European countries. Finland and Norway are both at number one, with a Estonia and the Netherlands sharing third place.

The 10 top countries in the Press Freedom Index:

1. Finland and Norway

3. Estonia and the Netherlands

5. Austria

6. Iceland and Luxembourg

8. Switzerland

9. Cape Verde

10. Canada and Denmark

The 10 countries with the least press freedom:

1. Eritrea

2. North Korea

3. Turkmenistan

4. Syria

5. Iran

6. China

7. Bahrain

8. Vietnam

9. Yemen

10. Sudan

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Corruption scandal shakes Vatican as internal letters leaked

Reuters, by Philip Pullella, VATICAN CITY, Thu Jan 26, 2012 

A general view of St. Peter square where Pope Benedict XVI celebrates 

the canonization ceremony in St. Peter square at the Vatican October 12, 2008.

(Credit: Reuters/Alessandro Bianchi)

(Reuters) - The Vatican was shaken by a corruption scandal Thursday after an Italian television investigation said a former top official had been transferred against his will after complaining about irregularities in awarding contracts.

The show "The Untouchables" on the respected private television network La 7 Wednesday night showed what it said were several letters that Archbishop Carlo Maria Vigano, who was then deputy-governor of Vatican City, sent to superiors, including Pope Benedict, in 2011 about the corruption.

The Vatican issued a statement Thursday criticizing the "methods" used in the journalistic investigation. But it confirmed that the letters were authentic by expressing "sadness over the publication of reserved documents."

As deputy governor of the Vatican City for two years from 2009 to 2011, Vigano was the number two official in a department responsible for maintaining the tiny city-state's gardens, buildings, streets, museums and other infrastructure.

Vigano, currently the Vatican's ambassador in Washington, said in the letters that when he took the job in 2009 he discovered a web of corruption, nepotism and cronyism linked to the awarding of contracts to outside companies at inflated prices.

In one letter, Vigano tells the pope of a smear campaign against him (Vigano) by other Vatican officials who wanted him transferred because they were upset that he had taken drastic steps to save the Vatican money by cleaning up its procedures.

"Holy Father, my transfer right now would provoke much disorientation and discouragement in those who have believed it was possible to clean up so many situations of corruption and abuse of power that have been rooted in the management of so many departments," Vigano wrote to the pope on March 27, 2011.

In another letter to the pope on April 4, 2011, Vigano says he discovered the management of some Vatican City investments was entrusted to two funds managed by a committee of Italian bankers "who looked after their own interests more than ours."

LOSS OF $2.5 MILLION, 550,000 EURO NATIVITY SCENE

Vigano says in the same letter that in one single financial transaction in December, 2009, "they made us lose two and a half million dollars."

The program interviewed a man it identified as a member of the bankers' committee who said Vigano had developed a reputation as a "ballbreaker" among companies that had contracts with the Vatican, because of his insistence on transparency and competition.

The man's face was blurred on the transmission and his voice was distorted in order to conceal his identity.

In one of the letters to the pope, Vigano said Vatican-employed maintenance workers were demoralized because "work was always given to the same companies at costs at least double compared to those charged outside the Vatican."

For example, when Vigano discovered that the cost of the Vatican's larger than life nativity scene in St Peter's Square was 550,000 euros in 2009, he chopped 200,000 euros off the cost for the next Christmas, the program said.

Even though, Vigano's cost-cutting and transparency campaign helped turned Vatican City's budget from deficit to surplus during his tenure, in 2011 unsigned articles criticizing him as inefficient appeared in the Italian newspaper Il Giornale.

On March 22, 2011, Vatican Secretary of State Cardinal Tarcisio Bertone informed Vigano that he was being removed from his position, even though it was to have lasted until 2014.

Five days later he wrote to Bertone complaining that he was left "dumbfounded" by the ouster and because Bertone's motives for his removal were identical to those published in an anonymous article published against him in Il Giornale that month.

In early April, Vigano went over Bertone's head again and wrote directly to the pope, telling him that he had worked hard to "eliminate corruption, private interests and dysfunction that are widespread in various departments."

He also tells the pope in the same letter that "no-one should be surprised about the press campaign against me" because he tried to root out corruption and had made enemies.

Despite his appeals to the pope that a transfer, even if it meant a promotion, "would be a defeat difficult for me to accept," Vigano was named ambassador to Washington in October of last year after the sudden death of the previous envoy to the United States.

In its statement, the Vatican said the journalistic investigation had treated complicated subjects in a "partial and banal way" and could take steps to defend the "honor of morally upright people" who loyally serve the Church.

The statement said that today's administration was a continuation of the "correct and transparent management that inspired Monsignor Vigano."

(Reporting By Philip Pullella)

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